While PlayStation continues to be a stellar arm of Sony, it’s less clear how Sony Mobile fits into the overall picture. The good news is that unlike years before when the division was costing the company hundreds of millions of dollars, Mobile is now profitable, posting a 21.2 billion JPY ($183 million) operating profit. Revenue, however, is down 35% due to cost-cutting measures – but that’s not the whole story.
Sales continue to be down for Mobile where Q3 FY15 netted 7.6 million units sold, Sony managed to only sell 5.1 million Xperia phones in Q3 FY16. That put sales compared to a year ago down by by 14.3 million units where in 2015, Mobile managed to ship 29.4 million phones, 2016 will only see 15.1 million units leaving Sony factories. For comparison (and it’s really not fair due to how terrible these numbers are), Apple shipped 78.3 million smartphones during the last quarter and iPhone sales are supposedly doom and gloom if you read the typical BS commentary that surrounds Apple. Sony Mobile sales peaked in 2014 when they shipped 40 million phones for the entire year.
I’ve argued this many times but if sales continue to drop, Sony will reach a point that no matter how much cost cutting they’re able to enact, the division simply won’t be profitable due to overhead costs like R&D and material cost. I know the importance of wanting to play in the mobile market and I’m not sure I buy into the notion that it’s too late for Sony – however it’s clear that whatever Kaz Hirai and Co. are doing with Mobile simply isn’t working. Just ask HTC and LG about their mobile efforts because things are going pretty terrible for them as well, so at least Sony isn’t an outlier.
Sony’s saving grace for the division is the $183 million in operating profits, though even that’s down compared to the quarter a year ago when Sony posted a $213 million operating profit. The Xperia X, followed by the Xperia XZ family was to be a fresh start for Sony and their mobile efforts but all signs point to things not working out. In fact, the only reason Sony isn’t posting a loss is due to cost cutting measures and not an increase in demand which is really telling of where Mobile stands.
For a long time we’ve known that Sony Mobile had more or less abandoned the US market but as you’ll see in their guidance report below, Europe is starting to get away from them too. You can only retreat for so long. Hopefully at MWC 2017, Sony not only unveils new smartphones, but an entirely new strategy as well.
Q3 FY2016 (year-on-year)
Sales: 35.3% decrease (FX Impact: -3%)
- (–) Reduction in smartphone unit sales mainly in Europe
- (–) Reduction in smartphone unit sales in unprofitable regions where downsizing measures were implemented during FY15
OI: 2.9 bln yen decrease (FX Impact: +12.1 bln yen)
- (–) Decrease in sales
- (+) Cost reductions mainly resulting from the benefit of restructuring initiatives
- (+) Positive impact of foreign exchange rates
- (+) Reduction in restructuring charges
FY2016 Forecast (change from November forecast)
Sales: 2.6% downward revision
- (–) Downward revision of smartphone unit sales outside of Japan
OI: Remains unchanged from the November forecast
- (+) Impact of cost reductions
- (+) Sale of smartphones at higher-than-expected prices
- (–) Decrease in sales